John Malone on the surge in M&A, the future of sports, and the challenges posed by big tech

John Malone, a prominent investor and chairman of Liberty Media, recently shared his insights during the Paley Center for Media’s annual International Council Summit. The event, held at the Paley Center’s New York headquarters, featured a comprehensive Q&A session with Mike Fries, CEO of Liberty Global. The conversation touched on various critical topics, from mergers and acquisitions (M&A) in the media industry to the growing impact of big tech companies.

The state of M&A in a changing political landscape

Malone emphasized that M&A activity within the media sector is expected to increase significantly with the incoming political changes in Washington, D.C. He speculated that a shift in regulatory policies could open the door for large-scale deal-making, previously curbed by Federal Trade Commission and Federal Communications Commission regulations.

During the virtual discussion, Malone pointed out that the election of Donald Trump as president could potentially bring about a sea change in the regulatory environment, creating new opportunities for mergers. For instance, the possibility of Comcast and Charter, the country’s largest and second-largest cable operators, merging into one is now a breath of fresh air in the industry.

“Why not?” Malone asked rhetorically, drawing parallels to other sectors where competitors can collaborate efficiently without each building individual infrastructures.

The future of sports broadcasting

Another focal point of the discussion was the future of sports on television. Malone has long lamented the lack of collaboration among entertainment and cable business leaders to combat the rise of on-demand streaming services like Netflix. According to Malone, the failure to form a united front has allowed streaming platforms to dominate the market, fundamentally altering consumer behavior.

Regulatory policies surrounding internet access and speeds, particularly under the umbrella of net neutrality, have favored digital giants. These companies are given free rein to distribute content via the internet without incurring significant costs, a stark contrast to broadband providers. For these cable operators, the high demands on their grids, coupled with heavy regulatory restrictions, present significant financial and operational challenges.

Malone referenced a staggering statistic: a live U.S. sports broadcast on a streaming platform could consume up to 30% to 40% of a broadband provider’s available bandwidth. This makes it nearly impossible for traditional cable operators to compete in the same space.

The technology behind the shift

Malone argued that streaming is merely a technology and posited that the shift from linear to on-demand programming was not driven by technological advancements alone. Instead, it was the regulatory advantages enjoyed by new entrants that tilted the balance in their favor. Traditional contractual relationships between program suppliers and distributors became obsolete as some suppliers opted to bypass traditional distributors and go directly to consumers, leveraging the benefits of net neutrality.

Big tech’s influence and financial power

One of the most pressing issues Malone touched upon was the formidable financial power and ambition of big tech companies. He stopped short of labeling these corporations as monopolies, instead referring to them as “almost monopolies.” These global behemoths benefit greatly from their extensive franchises and substantial balance sheets, further strengthened by soaring stock prices.

Malone warned that the concentration of economic value and power in the hands of a few global players is a significant challenge for regulators. Adding artificial intelligence (AI) to the mix only intensifies this concentration, offering the largest companies the best opportunities to profit from advancements in AI technology.

Reflections on market consolidation

Malone also addressed the topic of market consolidation among competitors, such as satellite TV providers Dish and DirecTV. He expressed his belief that these companies should have been allowed to merge five years ago. The potential advantages of consolidating their operations would have enabled them to offer services at lower costs while still competing with other distributors. However, regulatory barriers prevented this merger, which Malone argues could have been a more cost-effective solution for the industry.

Conclusion

In his characteristic low-key manner, John Malone provided a wealth of insights into the current state and future direction of the media industry. His observations highlighted the intricate interplay between regulatory policies, technological advancements, and market dynamics. As the industry braces for changes in the political landscape, Malone’s reflections underscore the importance of staying agile and collaborative in navigating the evolving competitive landscape dominated by big tech.

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